IS NOW THE BEST TIME TO
BUY A USED CAR?
The COVID-19 pandemic continues to have wide-ranging effects on the world, disrupting the economy and putting millions of people out of work in various industries and sectors. The automotive industry, in particular, has been hit hard by the pandemic and the efforts to curb its spread.
When stay-at-home restrictions were first announced back in March, many businesses, including car dealerships, were initially forced to stop operating. This, coupled with high unemployment, led to a dramatic drop in car sales, both new and used.
The slight increases back in January and February were all wiped out in March, with car sales falling by 27 percent across the industry in the first quarter according to data from automotive research group Wards Intelligence.
Dealers have tried using incentives to lure buyers onto their lots (or to their websites) to try to move some inventory, but it hasn't been enough to recover losses from the coronavirus shutdown.
While demand for cars has somewhat risen after states began reopening a few weeks back, it's still not at the level it was before the COVID-19 pandemic hit.
The Impact of COVID-19 on the Used Car Market
For several weeks, car travel was limited to essential work travel and supply runs. With travel restrictions in place, the economy shutting down, and millions of people on unemployment, there just wasn't much demand for vehicles.
For these reasons, used car sales for April plummeted by 34.4 percent compared to last year's numbers according to Manheim. States reopening their economies over the past few weeks have helped the situation somewhat, but the future is still a little murky.
However, though sales have been relatively slow to recover, there’s reason to believe the entire automotive industry will revolve around the used vehicle market for the foreseeable future.
Numerous car manufacturing facilities were initially closed when stay-at-home restrictions were placed. Some plants shifted to the production of ventilators and personal protective equipment (PPE) in an effort to aid the health sector. This means there will be far fewer new cars coming onto the market in the next few months.
Right now, though, there is an abundant supply of used cars, which is only expected to grow even more due to the expected market influx from struggling rental car companies selling off parts of their fleets.
Demand for used cars is likely to grow as more people are expected to choose pre-owned over brand new to save money during these difficult times.
Why It May Be a Good Time to Buy a Used Car Now
There are several reasons why now may be the best time to buy a used car, and those include the following:
Used car prices tend to be cyclical, going up during the summer months and reaching a peak around August, then going down during winter and hitting rock bottom around January.
Based on this usual cycle, we should be seeing a gradual increase in prices by now—but the COVID-19 pandemic has completely thrown the market off balance.
On average, the wholesale price of used cars went down 11 percent in April and dropped 10 percent year on year, according to the Manheim Used Vehicle Value Index. A drop in wholesale used vehicle prices usually correlates to a drop in retail used car prices.
Several factors contributed to this decline, all of which are related to business closures and restrictions due to the coronavirus pandemic. With unemployment soaring and the economy shut down for weeks, people weren't really in the market for a car (whether new or used).
As demand virtually disappeared, prices naturally went down.
You can see this when you look at the average prices of some popular used car models over the past six months. There is a more dramatic decrease right around March and April.
If you can afford it, you should take advantage of the low prices right now.
Buying a used car usually means having fairly limited choices as the inventories of used car dealers are dependent on what's sold or traded in. The situation is the same if you go to a rental car company.
This means you may not find the exact color or trim level that you prefer. Rental car companies usually put up their cars for sale after around two years in service. This time, however, it's looking like they’ll have to sell off more of their cars just to stay afloat.
Hertz, for example, recently filed for Chapter 11 bankruptcy protection, as the COVID-19 pandemic completely erased demand for the company's services, putting it in a really tough spot.
The company is expected to flood the used car market with a big chunk of its fleet, which should drive prices down. More vehicles on the market don’t only mean lower prices, but they also mean more choices for consumers.
Whether you're looking for a compact sedan, a truck, or an SUV, you're more likely to find one that will suit your needs perfectly if you buy at this time.
Used car prices are almost at rock bottom right now, but a lot of dealers are still offering great deals and flexible payment options to try to drum up sales.
Some dealers are offering low-APR financing for extended loan periods (some as long as 60 months) plus 90 days of deferred payments.
Other dealers are providing deep discounts on select makes and models. You're more likely to get a bigger discount on a car that’s been sitting on the lot for a long time.
It's very unlikely things will go back to the way they were anytime soon, unless a vaccine for COVID-19 is approved and widely distributed. With that in mind, you have to consider how you're going to move around in this new normal.
Even with all safety protocols in place, public transportation will still be more high-risk than driving your own car. Having your own vehicle will help you minimize your exposure to other people.
Obviously, not everyone can afford to purchase or lease their own car, but if your credit is good enough, now might be a good time to get one. As stated above, used car prices are pretty low right now and choices are likely to be abundant.
Top Used Cars
6-month Price Trend
Should You Buy a Rental Car?
Conventional wisdom says you shouldn't buy a rental car. The common belief is that they're high-mileage vehicles as they're on the road all the time. You may have also assumed that they aren't well taken care of because people don't care much for cars that aren't theirs.
While the high mileage might be true, the notion that rental cars aren't well-maintained is technically incorrect. Rental car companies only make money when their cars are on the road in the hands of customers—not while they're stuck in the shop for repair.
This alone is incentive enough for them to take excellent care of their vehicles.
Most rental car companies actually have strict maintenance schedules that all vehicles in their fleets must adhere to. Cars owned by private individuals don’t have to follow such guidelines.
Aside from the high mileage, rental cars are generally well-maintained and are kept in tip-top shape.
What to Look for When Buying a Used Car
Choosing the right used car involves a lot of research and investigative work. It should never be left to luck. There are a lot of things that you'll need to consider and look at to make sure the vehicle you buy will be reliable and won't just suddenly stop working.
Check the car's history
The first thing you should do is check the complete history of the vehicle you're interested in. Whether you're buying from a private owner or from a used car dealer, make sure to get all pertinent information regarding the car's past—like how many previous owners has it had or has it ever been reported stolen?
Run the VIN (vehicle identification number) through a service that will let you know if it has been involved in an accident or if there have been any recalls issued for the vehicle or any of its parts.
Do a complete inspection with a trusted mechanic
Make sure the car is parked on a flat, level surface when checking every inch of the vehicle. Inspect every nook and cranny with the help of a trusted mechanic.
Do the inspection in broad daylight to make sure you don't miss any dents or defects.
Exterior issuesBody and Glass
Take a long hard look at all of the car's body panels, from the fenders and bumpers, all the way to the roof. Check if all of them are aligned and if there are no oversized gaps between them. Study the paint color and make sure it's consistent all throughout.
Check for any sign of rust or paint damage. If the metal is completely rusted through, move on to the next car.
Open and close all doors, the hood, and the trunk lid. Watch out for any looseness in the hinges and try to listen for any unusual sounds. Check the rubber trim for signs of wear and tear.
Take a close look at the windshield, all windows, and any other glass panels. Look for signs of chipping or small cracks. Even the tiniest of cracks could grow and become a problem soon enough.
Like with the glass panels, look for signs of chipping or cracking in all light lenses. Make sure there's no fogging or moisture inside any of the assemblies. Check if all bulbs are working. A bulb not lighting up could mean it's a simple burnout or could be a sign of underlying electrical problems.
Having the car on a level surface will help you determine whether there's a problem with the suspension. If it's in good condition, the car should be level as well. Try to push the car down on the corners to see how much it bounces.
If it bounces more than once, there could be issues with the suspension.
Inspect all four tires and make sure they're all the same. A different tire may indicate that it has been replaced. There should be even wear across the width of the tread.
Check the tread depth of all tires using a tread-depth tool (or a quarter) to make sure they're still good enough for the road or need to be replaced. There should at least be 1/16 inch of tread left on the tire.
Sniff around inside the car. It shouldn't smell moldy or musty. It also shouldn't smell of smoke.
Check the mats, the side panels, and the ceiling for any foul smells.
Sit on all the seats to check if they can support your weight. Make sure there are no tears or rips.
Also, adjust all seats to make sure none of them are stuck.
Put the key in and turn the ignition. Check the dash and make sure all warning lights illuminate. Start the car and turn on all electronic components.
Newer models have more electronics and more complex infotainment systems compared to old ones, so there will be more items for you to inspect.
Under the hoodEngine condition
Lift the hood up and do a visual inspection. Dirt and grime are normal, but watch out for signs of dried up fluids. Check the hoses and belts and make sure they're supple but firm and not mushy or brittle.
Most new batteries are maintenance-free, so you'll essentially just have to check the charge level. Some batteries have built-in indicators.
Try to have a mechanic do a load test to find out the battery's charge level.
Inspect the radiator and look for any signs of cracking and physical damage.
Once you've completed all the checks, it's time for a test drive. Again, it would be best if you can enlist the help of a mechanic that you trust.
Drive the car in as many conditions as possible. Put it through its paces and test acceleration, maneuverability, braking, and the suspension's ability to take on bumps and uneven road surfaces.
Listen for any unusual sounds coming from the engine and from underneath the car. See if all of the interior electronic systems work, the radio, the sat-nav, and all other parts of the infotainment system.
Once you've completed the test drive, evaluate all aspects of the vehicle with the help of your trusted mechanic.